The Scope for Inflation Targeting in Developing Countries
October 1, 1997
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Summary
Inflation targeting (IT) serves as monetary policy framework in several advanced economies, where it has enhanced policy transparency and accountability. The paper considers its wider applicability to developing countries. The prerequisites for a successful IT framework are identified as an ability to carry out an independent monetary policy (free of fiscal dominance or commitment to another nominal anchor, like the exchange rate) and a quantitative framework linking policy instruments to inflation. These prerequisites are largely absent among developing countries, though several of them could with some further institutional changes and an overriding commitment to low inflation make use of an IT framework.
Subject: Banking, Central bank autonomy, Central banks, Exchange rates, Foreign exchange, Inflation, Inflation targeting, Monetary policy, Monetary policy frameworks, Prices
Keywords: Africa, Asia and Pacific, central bank, Central bank autonomy, developing countries, Eastern Europe, exchange rate, Exchange rates, Inflation, inflation target, inflation targeting, inflation targeting framework, IT procedure, Middle East, monetary policy framework, Monetary policy frameworks, monetary policy setting, price level, rate of inflation, WP
Pages:
53
Volume:
1997
DOI:
Issue:
130
Series:
Working Paper No. 1997/130
Stock No:
WPIEA1301997
ISBN:
9781451855159
ISSN:
1018-5941
